Running your own insurance agency can be a dream come true for many licensed agents. The independence and freedom that come with being self-employed are huge perks of the job. And if you’re an agency owner, it can be fulfilling and profitable to help your clients protect themselves, their businesses, and their families with the right insurance products. Just like any other business, your insurance agency has to deal with some of the more tedious parts of operating, including tax time. There’s no way out of it: your insurance agency has to take care of business taxes each year.
While it’s nobody’s favorite time of year, tax time is essential for your insurance agency to do correctly. If you’re looking for ways to save on time and money when filing taxes for your insurance agency, you’re not alone. Here are five tips to help you make tax season less of a headache for yourself and your agency.
How many times do you tell your own clients the benefits of having an insurance professional on their team? You probably spend time explaining the advantages of working with an insurance agent over bargain shopping for insurance alone. You know how much effort goes into becoming a licensed insurance agent who’s experienced enough to give sound advice to your clients that’s in their best interest. Considering all of that, why would you choose to do your own taxes?
You may think it’s going to save you time and money to do taxes yourself, but it can cost you more in the long run when you spend your valuable hours working on something that’s not your area of expertise. Unless you happen to be a licensed insurance agent and a CPA! A tax professional (much like an insurance professional) will know things the average person doesn’t. They can help you maximize your business deductions and file in the way that will be most advantageous to your personal situation.
While it may be tempting to do your taxes yourself, taking your own advice in this situation and working with someone who specializes in insurance agency business taxes can be a time and headache saver.
Working with clients is at the heart of what you do as an insurance agent. Although the past couple of years have made in-person visits less common, face-to-face meetings are starting to pick up again. For some people, they never really stopped. Regardless of how often you conduct in-person client meetings at your insurance agency, it’s important to keep track of all aspects of them when it comes to tax time.
Whether you’re driving across town or flying across the country, make sure to keep good records and receipts of all things client-meeting related. This includes:
This list is just a snapshot of the most common expenses insurance agents routinely encounter when conducting in-person business with clients. Working with your tax professional can be beneficial for discovering less common business expenses you may not even think of on your own.
What’s better than paying taxes once a year? For many insurance agency owners, the answer is “paying taxes four times each year!” We know, it sounds horrible. Who would want to pay taxes more often than they absolutely have to? But for smaller insurance agencies, including one-person independent agents, paying taxes all at once can be a large burden.
You can manage your cash flow and make sure you’re not stuck with a giant bill by setting aside money each month and paying federal and state quarterly estimated taxes. If you hire a tax professional, this person can calculate your agency’s estimated taxes and help you pay them easily—or even automatically—each quarter. You can even pay both state and federal estimated taxes online, with electronic fund transfers or by credit card (typically with a processing or convenience charge).
The insurance industry has a reputation for being a little behind the times in technology adoption. If you’re already practicing high-tech best practices, then you’re in the minority among insurance agents and agencies. From agency management systems to customer relationship management systems to licensing and compliance systems, new technology aimed at helping insurance agents is hitting the market every year.
Many of these systems either include or integrate with accounting and bookkeeping systems. You’re definitely not tracking your financials on paper or simple spreadsheets at this point, but are you truly using the most effective and efficient accounting and financial software for your agency?
If not, it can lead to more troubles at tax time as you try to reconcile income and expenses, profit and loss, agency commissions, payroll, and more. Adopting a new tech system can be timely and costly at the start, but it’s one of the best ways to make your life and your tax professional’s life easier throughout the year and when it’s time to file your insurance agency’s business taxes.
Being an insurance agent has its advantages. Not least of which are the many tax benefits you gain from running your own agency, or simply being self-employed as an independent insurance agent. Like other small businesses, tax time is a chance for you to take advantage of the deductions you’ve earned by running your agency.
Some common deductions often claimed by insurance agents include:
These are just a few of the many deductions you may qualify for as an independent insurance agent or agency owner. Your best bet is always working with a tax professional to ensure you’re claiming any applicable deductions.
Tax season happens every year, whether you feel prepared or not. As an insurance agent, these tips can save you time and money by allowing you to spend less time worrying about filing your taxes and more time serving your clients. We won’t say following these tips will make you like tax time, but being prepared can at least help you dread it a little less.
Thanks for reading our educational resource! Any above reference to a specific company, method, or product is meant for educational purposes only and is not specifically endorsed by Pie.
